Indonesia's oil, gas production may fall due to cabotage laws

March 4, 2011

By

Eric WatkinsOGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 4 -- Oil and natural gas production in Indonesia may drop by as much as 196 million boe this year if the government proceeds with its plan to require use of national flag vessels within the country’s maritime territories.

“The country may also lose as many as $13 billion in investments per year if the [cabotage] principle is implemented,” said Sammy Hamzah, vice-chairman of the Indonesian Petroleum Association.

Sammy told legislators that the production and investment losses would from four major production sharing contract holders: Chevron Corp., ExxonMobil Corp., ConocoPhillips, and Total E&P.

Sammy told Indonesia’s House of Representatives Commission V, which oversees transportation affairs, that the House should consider exemptions from the cabotage principle for several types of vessels used in the oil and gas industry.

“Some other countries, such as China, Australia, India, Brazil, and the US, also implement the cabotage principle, but they understand the specialty of the oil and gas industry, so that they exclude several types of vessels from being subject to the principle,” Sammy said.

IPA fully supports the 2008 Shipping Law which aims to empower the country’s national shipping industry, said Sammy. But he reminded legislators that Indonesian shipping companies are limited in their ability to provide certain types of vessels to the oil and gas industry. [Native Advertisement]Due to the expense, Indonesian shipping companies simply do not own several types of vessels, such as jack ups, semis, drills, and cable-pipe laying and seismic ships.

As a result, there is no point to include such vessels in the cabotage principle since their importation does not adversely affect the national shipping industry.